Kuwait’s government owes 2.35 billion dinars ($7.78 billion) in late payments to public entities, the finance ministry said in a letter responding to a parliamentary query.
“The delay in the financial payments to some parties is due to the lack of liquidity in the Treasury’s unified account, and these payments will be successively paid when liquidity is available,” the finance ministry said in a document dated February 16 responding to the query made in November.
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Local newspaper Al Qabas first reported on the letter, which was also reviewed by Reuters.
Oil exporter Kuwait has faced a liquidity crunch since the start of the COVID-19 pandemic, even though higher petroleum prices have provided some relief.
The Gulf country has not issued international debt since 2017 to finance spending as a public debt law expired and has instead used alternative sources of funding such as asset swaps between its huge sovereign wealth fund and the treasury.
In 2020, the parliament’s finance committee rejected a draft public debt bill, which would have allowed the government to borrow 20 billion dinars over 30 years.
Successive parliaments and cabinets have repeatedly wrangled over the law and Kuwait has $3.5 billion in international bonds due on March 20, which it raised in 2017 in its last international bonds issuance.
Kuwait’s sovereign wealth fund said in a separate document, dated February 10, that despite high oil prices – hydrocarbons often account for nearly 90 percent of state revenues – Kuwait still needs the debt law.
“The easy and available solutions to enhance liquidity have been exhausted,” the Kuwait Investment Authority said.
KIA also said economic reforms are needed, along with a law regulating withdrawals from the Future Generations Reserve Fund, which is meant to conserve oil wealth for the long term.
The late government payments include 1.29 billion dinars for the finance ministry and public accounts, making up 55 percent of the total.
That included 862 million dinars in ongoing grants for public and independent entities, including for the Public Authority for Housing Welfare and the Public Institution for Social Security.
Kuwait’s finance ministry said in the February 10 document that extending the maturity on the bonds due next month was “completely unlikely” because it would lead to a downgrade of Kuwait’s sovereign and bank ratings, as well as increase the state’s cost of funding.
Fitch Ratings downgraded Kuwait last month to ‘AA-‘ from ‘AA,’ citing “ongoing political constraints” that hinder the oil producer’s ability to address structural problems.
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